Hi, Ma'am/Sir! Can someone help to answer this Multiple Choice questions? I need a solution explanation on every question. Thank you :>
PROBLEM 6: MULTIPLE CHOICE - COMPUTATIONAL 1. On January 2, 20X6, Morey Corp. granted Dean, its president. 20,000 stock appreciation rights. On exercise, Dean is entitled to receive cash for the excess of the stock's market price on the exercise date over the market price on the grant date. The rights are exercisable beginning on January 2, 20X8 and expiring on December 31, 20X8. The market price of Morey's stock was P30 on January 2, 20X6 and P45 on December 31, 20X6. Morey used the Black-Sholes-Merton pricing model and estimated the values of each right at P16 each. As a result of the stock appreciation rights, the company should recognize compensation expense for 20X6 of a. 300,000 b. 320,000 c. 150,000 d. 160,000 (AICPA)At December 31, 20X7, the market price of the stock is P47 and the Black-Sholes-Merton pricing model estimated the value of the option at P18. At December 31, 20X7, Morey Corp should report on its balance sheet a liability for stock appreciation rights of a. 340,000 b. 360,000 c. 40,000 d. 60,000 (AICPA) 3. On January 2, 20x3, Morey Corp. granted Dean, its president, 20,000 stock appreciation rights for past services. Those rights are exercisable immediately and expire on January 1, 20x6. On exercise, Dean is entitled to receive cash for the excess of the stock's market price on the exercise date over the market price on the grant date. Dean did not exercise any of the rights during 20x3. The market price of Morey's stock was P30 on January 2, 20x3 and P45 on December 31, 20x3. As a result of the stock appreciation rights, Morey should recognize compensation expense for 20x3 of a. 0 b. 100,000 c. 300,000 d. 600,000 (AICPA) 4. On January 1, 20x2, Adams Company offered its top management stock appreciation rights with the following terms: Option price (predetermined) P20 per share Number of shares 10,000 Holding period 2 years Expiration period. Dec. 31, 20x2 The stock appreciation is to be paid in cash upon exercise. The market value of Adam's common was as follows: Jan.1, 20x2 ... P20 per share Dec. 31, 20x2 P24 per share Dec. 31, 20x3 P28 per share How much should Adams disclose on the December 31, 20x3, balance sheet as the liability for stock appreciation rights? a. 80,000 b. 60,000 c. 40,000 d. 25,000 (AICPA)5. Elizabeth, a public limited company, has granted 100 shape appreciation rights to each of its 1,000 employees in January, 20X4. The management feels that as of December 31, 20x4 90% of the awards will vest on December 31, 20X6. The fair value of each share appreciation right on December 31, 20X4 is P10. What is the fair value of the liability to be recorded in the financial statements for the year ended December 31 20X4? a. P300,000 b. P10 million c. P100,000 d. P90,000 (Adapted) 6. Jay, a public limited company, has granted 20 share appreciation rights to each of its 500 employees on January 1, 20X4. The rights are due to vest on December 31, 20X7, with payment being made on December 31, 20X8. Assume that 80% of the awards vest. Share prices are January 1 20X4 P15 December 31, 20X4 18 December 31, 20X7 21 December 31, 20X8 19 What liability will be recorded on December 31, 20X7, for the share appreciation rights? a. P60,000 b. P210,000 C. P 48,000 d. P150,000 (Adapted) 7. How should the settlement of the transaction be accounted for on December 31, 20X8? a. Payment to employees of P32,000, no gain recorded. b. Payment to employees of P16,000, gain of P32,000 is recorded. c. Payment to employees of P48,000, no gain recorded. d. Payment to employees of P32,000, gain of P16,000 1 recorded. (Adapted)Doc, a public limited company, has purchased inventory of 100,000. The company has offered the supplier a choice of settlement alternatives. The alternatives are either receiving 1.000 shares of Doc six months after the purchase date (valued at P110,000 at the date of purchase) or receiving a cash payment equal to the fair value of 800 shares as of December 31, 20X4 (estimated value P90,000 at the date of purchase). What should be the accounting entry at the date of purchase of the inventory? a. Inventory P90,000, liability P90,000. b. Inventory P100,000, liability P100,000. c. Inventory P100,000, liability P110,000, intangible asset P10,000. d. Inventory P100,000, liability P90,000, equity P10,000. (Adapted) 9. In the tax jurisdiction of Mack, a public limited company, a tax deduction is allowed for the intrinsic value of the share options issued to employees. The company issued options on January 1, 20X4, worth P15 million to employees. They vest in three years. The share options' intrinsic value at December 31, 20X4, was P12 million. The tax rate in the jurisdiction is 30%. What is the tax effect of the above issue of share options at December 31, 20X4? a. P1.5 million benefit to income statement. b. P1.2 million benefit to income statement. C. P1.5 million benefit recognized in equity. d. P1.2 million benefit recognized in equity. (Adapted) 10. In the above problem, what would be the tax effect if the intrinsic value at December 31, 20X4, was P21 million? a. P2.1 million tax benefit to income. b. P2.1 million recognized in equity. C. P1.5 million tax benefit to income, P0.6 million recognized in equity. d. P1.5 million recognized in equity, P0.6 million tax benefit to income. (Adapted)
